2020 in review: A mining bull market or just a recovery, with the best yet to come?


2020 has been a year that most of us would like to forget, the global COVID-19 pandemic and associated enforced lock-downs created turmoil in global markets with the retail, tourism and hospitality sectors hardest hit.

Against the negative backdrop, the performance of the mining sector has been much hyped, with some commentators claiming 2020 has been a bull-market year for mining companies pointing to a slew of fundraises that demonstrate investors are returning to the sector.

On AIM, secondary mining financings for the year-to-date were up 136% compared to the those of 2019, while the Toronto Stock Exchange (TSX) was up 66% but the TSX-Venture (TSX-V) was down 7%. So, while those companies in London and those on the main board of the TSX have enjoyed an improved inflow of equity capital those on the venture exchange have not been so lucky. Across these three markets, secondary mining financings for the year-to-date totalled US$1.9bn, compared to US$1.2bn in 2019, so clearly, overall there has been an improvement year-on-year.

However, the US$1.9bn raised to-date is way off what we have seen in previous mining sector bull markets. In 2016 a total of US$8.4bn raised from secondary issues on the AIM, TSX and the TSX-V and a staggering US$18.7bn in 2009.

Mining equity raises on AIM, TSX and TSX-V markets

Mining Equity Raises on the AIM, TSX and TSX-V markets.

Source: Mining and Metals Research Corporation

Clearly, based on the amount of equity capital raised, 2020 was not a bull-market for the mining sector, but rather just a minor recovery from what was the worst period (2019) for equity funding in the mining sector for the past 17-years. The high-gold price for the majority of the year made it easier for gold miners, royalty companies and gold explorers to raise funds, but explorers and miners involved in other commodities haven’t been so fortunate.

Is the best yet to come?

What could this mean for 2021 and beyond? Well perhaps the best is to come. The majority of governments are now faced with rising unemployment and debt-laden economies. It would be reasonable to expect many governments to follow China’s example and increase spending on large scale infrastructure projects and potentially introduce quantitative easing (QE) packages. Following its initial recovery post-COVID-19, China is on course to be the only major economy in the world to see economic growth during 2020, with over 10 million additional jobs created.

Increased global infrastructural spending will drive rises in base metal and bulk commodity prices, and a focus on green, clean energy transition-related projects could also bode well for battery metals. High national debts and potentially higher inflation rates could also give the wavering gold price a significant boost.

During the 2007-2009 global financial crisis QE and investment in infrastructure projects caused the copper price to rise from US$3,959 a tonne (t) in November 2008, which was when the US commenced QE, to a high of US$10,147/t in mid-February 2011, while zinc rose from US$1,080/t to US$2,463/t over the same period, nickel rose from US$9,700/t to US$29,025/t and the gold price rose from US&829/oz to US$1,365/oz.

These higher metal prices, in turn, drove up equity investment into mining companies to averaging US$14.3bn over five years from 2007 well above the average of the four preceding years, US$8.2bn.

The COVID-19 induced recession is expected to be more than twice as deep as the 2007-2009 global financial crisis and potentially the deepest since 1945-1946 according to World Bank forecasts, so clearly there is incredible pressure is on national governments to inject more money into their economies to expand economic activity.

The bull market for mining companies hasn’t occurred in 2020, it is coming in 2021 and beyond and a range of companies are likely to benefit.

Large high-grade copper discoveries that are being advanced up the value chain are few and far between. SolGold plc (LON:SOLG)’s Cascabel Copper-Gold Deposit, located in Ecuador, and Sandfire Resources NL (ASX:SFR)’s Kalahari Copper Belt Project, located in Botswana, are two such projects well positioned to see substantial value uplift.

While recent gold discoveries such as Greatland Gold PLC‘s (LON:GGP) Havieron Project, located in Australia, IronRidge Resources’ (LON:IRR) Zaranou Gold Project, located in Côte d’Ivoire, and more advanced projects such as AEX Gold Inc’s (LON:AEX) (CVE:AEX) Nulunaq Gold Project, located in Greenland, could attract further interest from larger companies that need bolster their low reserve bases.


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